Group Size, Coordination, and the Effectiveness of the Punishment Mechanism in the VCM: An Experimental Investigation

In this study, we examine the effectiveness of the individual-punishment mechanism in larger groups, comparing groups of four to groups of 40 participants. We find that the individual punishment mechanism is remarkably robust when the MPCR is held constant despite the coordination problems inherent in an institution relying on decentralized individual punishment decisions in the context of a larger group. This reflects increased per-capita expenditures on punishment that offset the greater coordination difficulties in the larger group. However, if the marginal group return stays constant, resulting in an MPCR that shrinks with group size, no such offset occurs and punishment loses much but not all of its effectiveness at encouraging voluntary contributions to a public good.